Jan 05

Systemic Imbalance and Income Inequality in the Bay Area

You can’t end economic inequality without preventing people from getting rich, and you can’t do that without preventing them from starting startups.

– Paul Graham, Economic Inequality

Sure you can.

Paul Graham’s rather defensive essay seems to wonder how Silicon Valley could even start to attack income inequality without stopping the ambitious from pursuing wealth. Graham calls himself “a manufacturer of income inequality” and says, “I’ve become an expert on how to increase economic inequality, and I’ve spent the past decade working hard to do it. Not just by helping the 2400 founders YC has funded. I’ve also written essays encouraging people to increase economic inequality and giving them detailed instructions showing how.”

Let’s set the record straight. Helping people generate “wealth” is not the same as generating “income equality.” Generating wealth assumes you are creating more money than you were given, which you can choose to either distribute or will be taxed away from you. Generating income equality indicates that this wealth comes at someone else’s expense.

The problem of income inequality in the Bay Area derives from a systemic imbalance in industries, with Paul Graham’s contribution as only part of the equation. It seems a bit grandiose of Paul Graham to even worry that he is somehow responsible for something as big as income inequality.

Follow the Tax Subsidies in the Bay Area

So what caused income disparity in San Francisco, for example? Hundreds of startups have flocked to the SoMa area for cheap rents, who have by all measures generated a lot of tax revenue for the city. By reasonable measures, these companies crush other Bay Area companies in this respect. But (and this is a big but) tax revenue has somehow not prevented the second biggest poverty gap in the country. What have these companies not generated?

Diversity.

Any intelligent VC or angel investor will do what’s called “hedging one’s bets”. You invest in a variety of industries and companies. If one or several fail and another takes off, you’ve protected yourself. San Francisco was sadly dependent on tourism before the tech boom. Politicians like Gavin Newsom came in and ensured protection to tech startups. Hundreds flocked in. These are companies that generate white collar jobs the average San Franciscan could not obtain. So lots of tech revenue, not a lot of opportunity for everyone else. Fierce competition for housing, food costs, etc for anyone NOT in these fields.

San Francisco has been flushed with cash as well as a huge influx of workers (mostly young and male). Some might invest back to promote a more diverse community, but others might also (and more likely) hole themselves at work for 13 hours a day in hopes to get rich and then leave.

Such a move is like introducing too much of a single species, like a tiger fish, in an aquarium. Sure, your tank is full of impressive predator fish. The end result is a tank of angry hungry tiger fish ( = tech workers complaining about costs) and other fish scared under the rocks ( = respectable blue collar workers and artists who are getting evicted and priced out in droves). There’s absolutely no crime in being a tiger fish. But tiger fish will do what it takes to survive, including eating all of your other fish.

tiger fish

It was the best of times, it was the worst of times

This is the imbalance that causes income disparity. So sure, we can knock ourselves out getting rich with our startups. We just have to secure our homes every time we leave the house, and dress in potato sacks because any flash of wealth is subject to ridicule or worse — getting mugged. Hiring people is impossible because the cost of living makes no sense for families. If the shit somehow hits the fan for us and we get sick, it’s time to leave. No one will help because they are too busy trying to make it themselves.

No middle class = no hope for the poor, and no protection for the rich. Paul Graham states that “economic inequality per se is not bad” and I’m saying that by just about every economist’s standard, it is bad for this reason. Every community has a finite number of resources at any given time. It is a ridiculous notion to think that extreme wealth should or even can peacefully co-exist around extreme poverty.

So what can the tech elite do to end class disparity?

So back to the quote, “You can’t end economic inequality without preventing people from getting rich, and you can’t do that without preventing them from starting startups.”

If someone asks us to embrace the notion of balanced community around us, it is not “preventing us from being rich.” They are asking for the opportunity to stay relevant *as well*. They are asking us, the newly arrived tech community, to be aware that diversity in our actual physical community is economically important for our own collective survival. It’s a way of hedging our bets to promote stability in our region. If we don’t, we’ll just be a bunch of angry tiger fish in a tank with no more food.

So it’s not all Paul Graham’s fault. It’s our fault for not heralding the Paul Graham of art, or the Paul Graham of life sciences. It’s our fault for being assholes by thinking that somehow tech should dominate this part of the world, or that “Silicon Valley” should be known for no other reason. A varying distribution pattern of wealth emerges as various industries wax and wane at any given time.

This city means something…and isn’t showing up

So now there is a swarm of young, well intending but very similarly minded gentlemen with more money than the people around them. As a result, San Francisco is increasingly becoming home to an expensive, insufferably boring monoculture. The first American place many Asian immigrants called home remains in relative silence as a serious presidential candidate calls to end Muslim immigration. One can’t walk into a bar without hearing something new about Burning Man, but mention something about poverty in middle America and you’ll get a joke about “flyover states.” The people who made history on the very ground we walk on are being pushed aside to make room for a sea of frivolous iPhone apps and concierge services like “the AirBnB for cats” and “Uber for Laundry.” There have got to be 200 bullshit “big data for x” startups by now. Corruption due to corporate campaign contributions is crushing democracy and violent Islamo-fascists want to destroy the Western world, but hey, we can get bento boxes ON DEMAND, people! What else do we need?

For happy, productive coders, choose Soylent!

Wall-E-2-fat-humans

New York has diversity. So does LA, Paris, London, even Austin and Portland. The Bay Area has a boom and bust history of investing a lot of money into “the next big thing.” Maybe it always will, but I don’t think it’s to the longterm benefit of its citizens, myself included.

Here’s a challenge: name a single living Bay Area citizen known around the world in an industry that is not either sports or tech.
.

  • adrielhampton

    Lawrence Ferlinghetti, Willie Brown.